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Arne Rasmussen, Chief Analyst at Danske Bank, gives his views on the recent price action in the global markets.

Key Quotes

“Currency markets felt the pain of another risk-off session with CHF and JPY in demand again and some selling pressure in Scandies from the renewed geopolitical flaring up due President Trump’s proposal on automotive tariffs and the US-North Korean summit cancellation”.

“However, the euro stood up decently against lingering worries over Italy; for EUR/USD the recent loss of momentum in US yields has clearly helped avoid testing new lows in the cross. Until more clarity regarding actual Italian policy implementation is obtained, an Italy risk premium will likely continue to weigh on the single currency”.

“Our Short-Term Financial Model for EUR/USD illustrates that the surge in Italian yields relative to Germany and the sustained uptick in US yields largely justifies the move towards 1.17. Lower levels in the cross could be tested, but we have a hard time seeing November lows (watch out for 7-Nov low of 1.1554) being broken”.